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Ushamil Private Limited v/s Simplex Limited

    Suit Appeal No. 2792A of 1995

    Decided On, 15 March 2002

    At, High Court of Delhi


    For the Appearing Parties: K.B.S. Rajan, K. Kiran, Sanjiv Puri, Advocates.

Judgment Text


(1) THIS is a petition under Section 20 of the arbitration Act, 1940 seeking directions to the respondent to file arbitration agreement dated 20. 8. 1994 and refer the disputes to the arbitrator. Short question that calls for determination is as to which court namely Delhi Court or Madras Court has jurisdiction. Petitioner has placed reliance upon letter dated 4. 11. 1993 wherein clause 12 relating to jurisdiction is as under:-

"this offer is subject to jurisdiction of Courts of Delhi/new Delhi. " however this offer was accepted by respondent on 9. 11. 1993 without reservation. Admittedly work was commenced by the petitioner in November 1993 itself. On the other hand, the respondent is invoking clause 16 pertaining to Jurisdiction contained in the letter of acceptance forwarded on 20/08/1994. This clause reads as under:-16. JURISDICTION: This order is subject to Jurisdiction of the Courts of madras. "

(2) IT is in this letter of acceptance that the arbitration clause 15 was included. It is settled law that the communications exchanged between the parties at the stage of negotiation become irrelevant once the parties enter into final written agreement which becomes binding and concluding agreement. As is apparent from the clauses of the letters dated 4. 11. 1993 and 20. 8. 1994, no exclusivity has been attached to the jurisdiction of the courts. It is the final agreement which is binding upon the parties. The petitioner is invoking clause 15 of the final agreement. In the letter of offer, there was no clause of arbitration. Similarly letter dated 9. 11. 1993 was silent for arbitration. On the one hand, petitioner is invoking clause 15 of the agreement dated 20. 8. 1994 whereas on the other hand he has placed reliance upon clause 12 of the letter sent by him. Such a course is not open to the petitioner. Either he has to rely entirely upon letter of offer sent on 4. 11. 1993 and the letter dated 9. 11. 1993 received by him which according to the petitioner is the letter of acceptance or he has to rely upon final agreement concluded between the parties. In the letter of offer, there was no arbitration clause. It is the final agreement between the parties which contained arbitration clause and therefore clause 16 of the final agreement has to be given effect to as far as question of jurisdiction is concerned. Now arises the question whether clause 16 has element of exclusivity or not. Wherever there is ouster clause, it has to be clear, unambiguous and specific as various causes of action arise in matter of contracts. For instance cause of action may arise where contract is made or where it should have been performed or where its breach occurred. The nature of contract may provide jurisdiction to more than one courts but if the parties agree to vest jurisdiction in one of the courts, such an agreement between the parties is neither against public policy nor against the provisions of procedural code governing the jurisdiction of courts vis-a-vis causes of action.

(3) ACCORDING to Mr. Sanjeev Puri, learned counsel for the petitioner clause 16 of the agreement does not have element or ingredient of exclusiveness as the word 'alone' is missing where courts of Madras have been vested with the jurisdiction. Mr. Puri has placed reliance upon a. B. C. Laminart Pvt. Ltd. and another Vs. A. P. Agencies. Salem AIR 1989 SC 1239 wherein a view was taken that where the clause under which it is claimed that there is ouster of jurisdiction of courts only stated that any dispute arising out of sale would be subject to jurisdiction of court within whose jurisdiction order was placed but there were no words like 'exclusive', 'alone' and the like, other Jurisdictions having connecting factors were not clearly, unambiguously and explicitly excluded. The above ratio was handed down in view of clause 11 of the agreement which was as under:-"any dispute arising out of this sale shall be subject to Kaira Jurisdiction. " it was observed that when the Court has to decide the question of Jurisdiction pursuant to an ouster clause it is necessary to construe the ousting expression or clause properly. Often the stipulation is that the contract shall be deemed to have been made at a particular place. This would provide the connecting factor for jurisdiction to the Courts of that place in the master of any dispute on or arising out of that. contract and therefore it would ipso facto take away jurisdiction of other courts. where an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other courts. The difficulty arises where the words 'alone', 'only', 'exclusive' and the like are not used. It was observed that even without such words in appropriate cases the maxim 'expressio unius est exlusio alterius' i. e. expression of one is the exclusion of another is applicable.

(4) WHERE there are two or more competent courts which can entertain a suit consequent upon a part of the cause of action having arisen but if the parties to the contract agree to vest jurisdiction in one such court to try the dispute which might arise between themselves the agreement would be valid and if such a contract is clear, unambiguous and explicit and not vague, it is not hit by section 23 and 28 of the Contract Act. This is so because of commercial practices and the mercantile law, otherwise, the salutary principle is that the parties cannot confer jurisdiction even with consent. Coming to the facts of the case in hand, ambiguity has crept firstly in the letter of offer dated 4. 11. 1993 whereby Jurisdiction of courts other than New delhi was ousted. The said offer was accepted unequivocally and without any reservation. However, while entering into agreement wherein arbitration clause was there and that too when the petitioner had commenced work and started executing the work on the presumption that the jurisdiction of courts of Delhi/new Delhi would be invocable that clause 16 was introduced in the letter dated 20/08/1994 vesting the Jurisdiction in courts at Madras. Another relevant factor is that the contract was to be performed at Delhi; so much so application under Section 20 of the Act was also moved at earlier point of time at Delhi. Since both the clauses do not have element or ingredient of exclusivity so the courts of Delhi and courts of Madras have jurisdiction. At the time of commencement of negotiations, the petitioner laboured under the belief that the courts at Delhi would have jurisdiction but after eight months, a letter was dispatched by the respondent wherein it was mentioned that the order was subject to jurisdiction of the courts at madras. In situation like this the factor as to the place where the contract is to be performed and where breach occurs becomes more significant and determining factor. Taking overall view of the conspectus of facts as referred above particularly the place of performance of contract and the letter of acceptance of offer given in the letter dated November 1994, the petitioner cannot he put to hardship or jeopardy by submitting to the jurisdiction of Madras courts.

(5) APART from this, sub-section (4) of Section 31 specifically provides that where in any reference, any application under this Act has been made in a court competent to entertain it, that court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of tha

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t reference, and the arbitration proceedings shall be made in that court and in no other court. The words "competent to entertain" has great significance and encompass in their fold all those courts in whose jurisdiction whole or part of cause of action arises. Since the instant application was filed much earlier than the one filed by the respondent, the petitioner has to be given the benefit of sub-section (4)of Section 31 of Arbitration Act, 1940 besides other factors. (6) FOREGOING reasons pursuade me to allow the petition. Mr. Justice C. L. Chaudhary, a retired Judge of this court is appointed as Arbitrator. The learned arbitrator shall fix his own fee. The parties shall appear before the learned Arbitrator on 30th April, 2002. Copy of this order along with relevant record be sent to the learned Arbitrator.